A Group of EU Countries Seeks More Flexible Gas Storage Provisions

A group of EU countries with large storage capacities is requesting the European Commission for ‘more flexible’ provisions regarding gas storage, fearing high filling costs ahead of the upcoming winter. EU countries must, according to current regulations, gradually fill their storage facilities to 90 percent by November, with prescribed values in February, May, July, and September.

The provisions are currently causing them headaches as gas prices on the European reference digital exchange TTF have risen by about 50 percent since the beginning of September, reaching the highest level in approximately two years.

Under such conditions, representatives of the group of EU countries requested more flexibility in storage provisions during a meeting with representatives of the European Commission on Thursday. Germany wants them to be ‘less rigid,’ said a spokesperson for the Ministry of Economy and Climate on Thursday.

– More flexible provisions would alleviate the pressure to fill storage and allow for the normalization of market conditions – she added.

Problematic Signal

Germany, along with several other EU countries, including France, has warned that the provisions regarding storage levels send a signal to the market that purchasing gas is an obligation, which raises prices, said four informed sources. Alongside Germany and France, Italy also has large gas storage facilities and has signaled, according to Bloomberg News, that it would support the initiative to ease the regulations.

Italy will consider the requests of other EU members, including Germany, and support the easing of EU storage filling provisions, said Federico Boschi, director of the energy administration at the Ministry of Energy and Environment, a week ago, further explaining that they advocate for lower capacity filling thresholds in Europe.

The Netherlands will advocate that the specified level of storage filling be an ‘ambition’ rather than an obligation, said spokesperson for the Ministry of Energy Pieter ten Bruggencate. According to the Dutch official, the easing of European regulations is also demanded by France, Austria, and the Czech Republic, in addition to Germany.

Reaction

Storage facilities in Germany, Italy, and France are currently being emptied at a rapid pace, ranging from 2.5 terawatt-hours to just over 800 megawatt-hours per day, and their capacities are currently filled at 46, 57, and 28 percent, respectively. Europe has consumed more gas from storage this winter due to significantly lower temperatures, weaker winds, and the suspension of Russian gas deliveries via Ukraine.

The storage facilities should be refilled during the summer months when demand and prices are usually relatively low. However, the situation this year is more complex, and the market has reacted to strong demand and the known obligations of European countries regarding storage filling with higher gas prices for summer delivery than for those in the fall. This means that traders are deprived of financial incentives to store gas until winter, explains Reuters.

Others Are Buying Too

At the same time, Europe must compete for gas with other major buyers, which means that EU countries may have to pay even more to fill their storage as regulations require. If stocks in European storage facilities drop to about 35 percent by the end of winter, achieving the 90 percent filling target would cost, according to current market prices, around 36 billion euros, as shown by Reuters calculations.

At the EU level, storage capacities were approximately 46 percent full on Wednesday, according to data from Gas Infrastructure Europe (GIE). In Croatia, stocks have dropped from 36 to 28 percent capacity since the beginning of February, according to GIE data. The European Commission intends to propose longer deadlines for filling stocks in the coming years, but has not publicly signaled whether it is willing to be more flexible with this year’s targets.